There are two very similar contracting methods when an owner desires the Construction Manager (CM) to hold subcontracts on a project.  There is the Construction Management “At-Risk” and the Construction Management “For-Fee”.  In either format the CM should be hired by the owner very early in the design stages of the project.  The CM then adds value for the owner during the design phase by working closely with the architect and engineers to advise on project scheduling, expected construction cost, value engineering, constructability analysis and sub-contractor bid package development.

Construction Management “At-Risk” is the more common method of procurement in the construction industry.  The CM is hired and joins the project team early in the project conception and is active with the design team and client throughout the design of the project.  When design documents are approximately 80% complete for construction, the CM develops the Guaranteed Maximum Price (GMP) for the project.  Once accepted and approved by the client, the GMP becomes the contract price.  By nature of a GMP, all cost savings obtained during subcontract purchasing are easily identified and earmarked by the project team for reallocation.  Alternately, any cost over-runs that occur are funded by reducing the contingency line item in the GMP and, upon exhaustion of the contingency, the CM’s fee.  The CM is financially responsible for any cost over-runs, which can result in profit reduction if the GMP is not managed appropriately from the beginning design stages of the project.  The “At-Risk” method is required if the owner's lender requires a bonded GMP. 

Construction Management “For-Fee” is a similar arrangement to “At-Risk”.  The CM joins the project team early and provides cost estimates during the design phase, similar to the “At-Risk” process.  The major difference is that there is no GMP, but rather a control estimate or other budget tracking mechanism chosen by the client.  With the elimination of the financial risk to the CM, consequently this allows the owner to hold and control the project contingency.  If cost savings are achieved, the client can add back in bricks and mortar but, unlike the “At-Risk” approach, cost over-runs are absorbed by the client and do not affect the CM’s fee.  In this circumstance, it is the CM’s obligation to the client to manage the control estimate effectively during pre-construction, purchasing and construction because the CM’s performance will be measured by the final cost.

Each project is unique and both CM contracts have many benefits and few disadvantages.  It is Brechbill and    Helman’s responsibility to educate the client on the nuances of each contract and help match the correct contracting approach to their specific project. 

Regardless of the format chosen, Brechbill and Helman’s approach to the project does not change.  Our goal is to create a positive team environment and focus on mutual success for all team members to develop long term relationships.